house financial services committee. he made remarks that has sent the dow, nasdaq and s&p splint sprinting higher, the s&p up 16 points and sitting just four points shy of the 3000 now let's go to elon moy with the fed minutes. >> the members agree the risk to the outlook had intensified as of the june meeting and that many members believed additional accommodation could be warranted if uncertainty to the outlook continued. that view was shared by the broader group of fed participants many felt the balance of risk was now weighted to the down side there also appears to have been a very robust discussion of the arguments for a rate cut in the near-term. some felt that a cut could be justified to cushion the economy against future adverse shocks. some felt that a cut could be w

warranted in order to shore up inflation expectations and a couple participants -- james bullard, one of them, wanted to acut rates to allay concerns about inflation the minutes show officials felt the increase in uncertainty was a relatively recent phenomenon and there had been staff discussion about the sensitivity of markets to the trade fights with mexico and several officials felt they wanted to wait for more information on the trajectory of the economy before reaching a final conclusion. however, the minutes also show that the fed realizes that markets have baked in a rate cut relatively soon. the minutes state the reason financial conditions have remained supportive of growth is because they were premised on the expectation of easier monetary policy. guys, back to you. >> elon, medicatiothanks let's bring in steve liesman with reaction to what has been a

very, very busy fed day and now the minutes on top of that. >> it fits together, kelly you had a fed chairman that all but guaranteed that there was going to be a rate cut the end of this month. what we learn now the june meeting, maybe more so than we thought, a large number -- the key thing that elon said, many thought additional accommodation was needed there was a preponderance of members on the board one headline i'm looking at off the dow jones, uncertainty in economic risk increased significantly. didn't say that after the meeting there. but this idea that there was -- significant risk, but did want to give time to play out as for fed chairman jerome powell, he was very clear today about what the federal reserve was going to do. he emphasized global economic weakness and low inflation as the more important factors beyond the strong economy or the economy being a good place in fact, he was asked specifically if these factors would lead to lower interest rates. now, listen to this very carefully, what he says.

because the congressman says, will these things lead to lower interest rates, and now give a listen >> yes, as i mentioned, we think that uncertainty around trade policy and also global growth, it's not all down to trade policy there's something going on with growth around the world, particularly around manufacturing and investment and trade. and so that uncertainty is, we think, weighing on the domestic economy. >> okay. let's look at the probabilities now. 100% chance of a rate cut in the fed fund futures market. 22% chance of a 50 basis point cut. only a 37% chance of another cut in october, but that rises to 57% by december with a 20% chance of a 50 the question now, i don't think it's if the fed is going to cut in july. it's how many cuts it might provide thereafter >> we'll be watching that. steve, stick around. we're going to be joined by

david kelley, chief global strategist with jpmorgan funds and tom pore selly, economist with rbc capital markets welcome, all three of you. tom, you were in the camp that there is not a justification to cut rates in july. why do you feel that way, and what do you think chairman powell and the other fed people see that you don't >> well, let's be clear. after today, it's hard to hold that view. so we have changed our call, obviously, given what he has said today so we are now looking for a 25 basis-point cut. but what you said still holds true we don't necessarily think that the economy needs a cut at this point. but, you know, we're -- we're not going to make some moral stand. the chairman wants to cut. he was quite clear on that what i thought was interesting about how the press conference started with him was, he basically said nothing changed since the june meeting and i would say a number of

things did change. you know, we have at least a tiny bit of clarity on trade post g20 we moved sort of a step in the right direction. we now know that the payroll report from the previous month was, you know, sort of a one-off, thanks to the most recent payroll report. so the fact that he didn't give any weight to any of these factors i think really drives home that they are obviously very worried about where we are from a trade perspective globally and, you know, but i think this all begs the question, what is a 25 basis point cut or 50 basis point cut going to do from a mitigation perspective as it relates to trade and we would say the impact there is going to be incredibly momentous. >> to the overall sort of zit guide at play here, wouldn't improve the matter of trade tangles. what do you think the chairman

and his brethren there and sisters there see that some who are more hesitant don't? >> they seem obsessed with the inflation idea i thought it was really interesting that the chairman said that he wanted to fight for inflation at 2% keep it up to 2% they don't want to find themselves in these situations and they can't push it up. also, it was interesting he said, you know, we want 2% don't want 1.7 or 1.8, we want 2. so clearly he's saying this is not about a weakening economy, this is about inflation. they're saying that, the problem with that, that's a slippery slope. we may not get to 2% inflation does that justify october, december you could go down to zero on the federal funds rate and not get to 2% inflation. i tend to agree with tom, it won't stimulate the economy. but at the moment the fed seems determined to acquiesce, i guess, to the political demands,

to what the market seems to expect -- >> so david -- >> willing to acquiesce, given lower rates. >> just to be clear, you think they're going to cut not because you think they should, but just because you think they will? >> yes i think so i think they're fundamentally making a mistake here. i think, you know, chairman powell admits that if there is any possibility of stimulating the economy, not by the way you need to stimulate an economy when you've got a 3.7% unemployment rate, but i think the fed is -- i think they're worried about independence i think they're worried about getting -- >> but if they're worried about independence, and david i take your point and thank you for clarifying that let me bring steven in on this, as well. if they're worried about independence, then why do a rate cut everybody seems to be saying, well, the market kind of wants it, and i guess we could take it. but the president is calling for -- >> tyler used the term

zeitgeitz. let's fit in monetary policy listening to this hearing. the democrats want the fed to cut. the republicans want the fed to cut. the precedent wants the fed to cut. the markets want the fed to cut. if that's not a zit and a geist all together, i don't know what to do with it. and poor old tom pore chely, my intelligent colleagues on this panel. >> wouldn't you say there's a lot of people on wall street who also think the fed is going to cut as opposed to just thinking, oh, they definitely should and that's definitely the right thing to do? and doesn't the justification matter i mean, the idea they're going to cut by saying, because it's a slow down and there's global growth concerns and, okay, well, what about the u.s. economy? and if it's not slowing, can you just -- why can't they just say, yeah, we're going to cut, the economy is strong, but productivity -- the messaging is

completely mutddled as far as i can tell. >> i could not agree more with that, kelly. and i would say, you know, this -- this may come as a surprise to some of your viewers, but, you know, we speak with a lot of very significant investors at some of the biggest organizations, as i'm sure david does too and i can tell you, i was in meetings yesterday i've been in more meetings this year than i've been in any other year in my career. and in recent meetings, no one is clamoring for the fed to cut rates. i want to be really clear on that point and, again, these are some highly sophisticated investors and no one seems to think that this economy needs a cut yet here we are with the fed about to cut rates. >> but there is one constituent who is clamoring for a cut in rates. >> i want to underscore that we have not heard anybody say, and i think this is what tom was talking about. forget the investment side of things nobody is saying, but for a quarter point on the interest rate, i'd be building a car plant.

>> exactly. >> or i would be doing this. and then i think it was david -- david kelley's point is interesting in what would the quarter point do for the trade which is very little now, i hate to say this. but if the fed can buy itself a little political piece with a quarter point rate cut and have the -- i was going to say hounds -- probably the wrong word have the critics back off a little bit, and they give him a little piece of red meat -- >> give an inch. >> then maybe they can buy themselves some time and flexibility to figure out the right narrative here i agree with what you're saying, kelly. that the narrative is a little confused right now. >> so i'm going to go to elon moy for the last word. >> it doesn't have to be an either/or as the reason for the cut. what the minutes showed, it's an insurance cut, there's an argument to make for that, as well as cutting in order to support inflation. so the fed is looking at both arguments and both seem to be

gaining some traction amongst both participants and amongst members. and i will also say that the discussion of financial condition was interesting, because it also shows that the fed recognizes that if it doesn't move in july, you talk about being hamstrung by markets, if it doesn't move in july it's going to end up tightening financial conditions inadvertently. that's something the fed understands and is considering as it looks to what it's going to actually do when it makes its final decision in july. >> elon, thank you very much you want to jump in -- i'll give ow -- i'm going over here. >> i'm sorry, and elon is so brilliant. but i would just ask, at 3000 on the s&p, 183 on the two-year, how much looser should financial conditions be? >> well, i'm going to tie it off, david, and tom. >> it's not going to be looser, it's just they don't want them to tighten. >> but they're one standard deviation easy right now, guys they're one standard deviation easy from a financial conditions perspective. and prior to the whole trade thing happening, you are half a

standard deviation easy. so if we made some modest positive progress from a trade perspective, then how much lower can they possibly go i mean, look, make no mistake. i'm totally sympathetic to the idea of if financial conditions did tighten, then, yes, i think that that is something that would weigh on the process if you take a rational step back, you're already a full standard deviation easy. and i don't think there's a lot of room for it to fall. >> we've got zeitgeist and standard deviations. i'm going to tie it off with an homage to james carville right now it's not the data, stupid that's not why the fed is doing what it's doing. i don't see it in the data gentlemen, lady, thank you very much. >> let's ponder that and get some market reaction to the feds' headlines. bob pisani, tracking all this action from the floor of the nyse >> and certainties have increased. that's the magic word. pushed over 3000 right after the open but sold right into it.

i think everybody agrees down here with steve and everyone else 25-point insurance cut is baked in at this point. >> i think what would really surprise the market right now would be, number one, no rate cut. or number two, a 50 basis point cut. i think both would be surprises. so consensus is built in i thought the minutes were interesting. a couple officials favored a rate cut in june increased uncertainty has been relatively recent. and i think that's why all of a sudden we all agree right now that it's going to happen. that 25 basis point cut. as far as what was moving today, same big tech names recently with micron, nvidia, cisco systems, microsoft oil, over $60. we had interesting inventory numbers out there. we were just 56, 57, a few days ago and over 60 now. look at chevron, marathon, moving to the up side. elsewhere, banks, 1.83 -- where are we on the ten-year

look, these are big losers by the way, guys, took us five years to get to s&p 3,000, 50% increase from 2,000 to 3,000 all of these banks generally have been notable underperformers. guys, back to you. >> thank you very much bob at this sanny. bond market reaction now from rick santelli at the cme. >> tells you the whole story at 8:30 eastern when the tech was released, you see the way it dropped, basically right back there again. the further out the curve you go, the more different complexion you get regarding reading the markets. ten years, down a basis point. 30-year bonds up a basis point but if you look at the dollar index, it's also hovering at the lows of the day. and i think that's the biggest tell listen, whether you wear a dove hat, a hawk hat or a dunce hat, it is very difficult to look at these markets, listen to jay powell and think that there's definitely an ease coming. there was no pushback. but i will push back just a little and that last segment, tom says,

how low can they go? i'll show you something. you know what zero percent is? that's what the coupon was on the auction of boons that went off eight hours ago. zero second time, last time was during the credit crisis we are succumbing to the pressures of this global plush of interest rates. and all those questions, but all those smart congressmen and women, how much did you hear about europe, how much did jay powell talk about the inversion as a negative signal but not talk about how could it not invert, considering there are negative rates from every corner of the globe back to you. >> rick, on that point i mean, the bond levels in europe are insane right now. i read the czech republic, poland, peripheral eastern european countries, european corporate junk debt were start being to see negative yields. >> yeah, maybe some of these economy metric models that call

for a recession, i'm not saying there isn't one coming at the end of the day, they need to take into account how the cooties of low and negative interest rates are completely changing the type of water in our well, our liquidity. there is nothing i don't care how much they cut they're not going to fix what is being exported, that's broken overseas i think these are conditions that need to be discussed. but it certainly seemed like libor versus lever, much more popular questions. >> rick santelli, thank you so much. coming up, the dow hitting a new all-time high on the heels of this today. the s&p crossed 3000 for the first time we'll talk more about what signals that really sends. the dow transports still in correction, after all. the small cap russell 2000 off its high what doeit mn ens eawh you put it together? we'll get into that when "power we'll get into that when "power lunch" comes right back. we'll get into that when "power lunch" comes right back. [ sniffing ]

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welcome back to "power lunch," everybody. and those levels you just saw there, more important than ever for the major averages we'll tell you why in a minute hitting new highs, the s&p hitting 3000 for the first time in the session today but there's the dow transports, ask they're still in correction territory. down more than 10% from their september highs. goldman out with a bullish call, initiating coverage and buy

ratings on fedex, u.p.s. and job hunt let's talk to the principle and managing partner of broughtan capital. they should be participating in the rally, right do we write this off as, hey, they've got unique issues to the sector, or are we supposed to read as a warning sign about the economy? >> i see it as a warning sign. i see it as a warning sign you know, kelly, they have a well-earned reputation, as you're well aware, of, you know, theory of predicting the economy. but that comes from the underlying goods flow. and the bottom line is, starting really in december of last year, we began to see signals first in international air freight, saw the warning out of fedex in december of '18 and the shipments index. and we have seen that increase since then the goods flow is negative, especially in europe, accelerating negative and asia and it's getting weaker here >> so it sounded --

>> lower volumes suggest the fed is not only right to be getting rates, but late to the party. >> sure, and you're kind of the missing link in this whole discussion wie're having, but i would ask, when you talk about it slowling, how much are we talking about? a lot of the folks seem to be in the mind-set, donald, as you're well aware, every slow down goes back to 2007, 2008 can we take a hit in terms of activity and have it look -- look at 2016 we saw the soft patches in the economy before >> right, absolutely right you have to put it in context. the slow down is important to look at. in some areas of the economy -- most areas of the economy, we're seeing down single digits, mid single digits in the domestic economy. but there are some areas that are just quite alarming. we're seeing over 15% down in the air freight volumes going into shanghai. you say why is that a problem? that's all the parts and pieces

to get assembled and shipped out. that's what asia pacific is going to be. when i see those numbers, i get really nervous domestically, you know, lumber shipping, chemicals shipping, autos and auto parts shipping all suggest slower times if i look at volumes and real-time on a platform like you get out of s.o.n.a.r. or d.o.t., real-time what's happening and a little bit better, but june ought to be better ought to be the strongest freight month for trucking seasonally and, you know, it's still down second quarter volumes were still down on a year-to-year basis. >> i don't want to let you go % without getting a couple recommendations here maybe the fed is looking at these data, and that's behind what they plan to do you like fedex -- >> i know a number of them do. >> i bet they do why wouldn't they? fedex and xpo, two picks you like long. but you say the best pick for the second half in transports would be short the truckers. why?

>> well, we like xpo and fedex, because one, their valuations reflect what we're talking about. they were -- and they were early to warn everyone about it. they deliver e-commerce, which is going to grow even in '08, e-commerce grew at 14%. so in a bad year, only grows mid teens rates. you know, that's not a bad business to be catering to truckers last year had magnificent pricing power. like they have never had before. and they passed most of it on to their drivers to compete in a tight labor market that pricing power is eroding. it's going down as significantly, almost as significantly now as it went up significantly in '18 and those costs -- you can't cut those driver pay -- >> once you've raised them, can't cut them >> can't cut 'em so if we see lower -- so if we see lower volume and lower pricing, then that's going to be lower revenue and much lower margin on that lower revenue and the stocks, unlike fedex and

xpo, who have been taken out behind the woodshed, the truckers are down but not nearly as severe. >> donald, thanks. love the beard, too. appreciate it. >> always a pressure. virginia virginia, my home state. basketball champs. lacrosse champs. and now -- >> this is getting unfair. >> and now a atop cnbc's list for business which came in last. and elon musk sending out another gung ho email. i haven't seen the word gung ho in our copy -- we'll talk to a former tlaes board member. "power lunch" is right back "power lunch" is right back after this in clinical trials, prevagen has been shown to improve short-term memory. prevagen. healthier brain. better life.

♪ welcome back to "power lunch. i'm mike santoli small caps could be flashing a warning sign check out this chart from bespoke, the russell 2000 at its lowest since the financial crisis which way will they break next let's bring in matt mailee and

chad morgan. matt, interpret this dynamic for us conflicting arguments, one that says you want to see small caps participate or lead in a bull market the other says, you know what, if doesn't always matter if they lag. the overall market can still do fine >> yeah, i am very concerned about those that say that the small caps really don't matter too much yes, there have been a few occasions where an underperformance hasn't hurt the market overall but there has been so many other times where it's been a very big warning signal i mean, we saw it last year. we saw it in 2015, '14, 2011, 2007, '98, '89 and the crash of 1987 i'm not saying we're going to get a crash, but there are so many other examples where the underperformance has signaled the rest of the market is about to roll over we did see a time where they both rallied nicely at the end of the 1990s so if you think what the fed is doing is create another bubble, that's fine. but with the weakness in the

economy, i'm looking right now at the russell 2000 and the channel it's been in sideways and if it breaks below that, a big warning sign for the rest of the market so i think if you ignore the russell 2000, do so at your own peril. >> so keep an eye on that. a little bit of a modest cushion below the lower end of that trading range, looks like. chad, would small caps represent some kind of value here, a comeback, or not >> so we're underweight small caps at this point the reality is that we're having a global slow down, and small cap indices, they're cyclicly exposed. largest component is financials, industrials and materials. so we would be avoiding the small caps all together. due in part because of flattening of the yield curve, trade concerns and global growth we would, though, be overweight. large cap quality companies and on the sector side, we would be continually overweight, health

care and consumer staples. so at this inflection point, this is the reason why they're underperforming the broader markets and we believe over the next 12 months they will continue to underperform >> not as many of the steady type companies that the market seems to favor now we'll see if that still remains the dominant mode. matt and chad, thank you very much for more "trading nation," head to our website or follow us on twitter. mike, thanks very much ahead on "power lunch," tesla is higher today on the report the company is rafrimping up production details ahead. and streaming overload with more and more streaming services joining the war for content, who comes out on top. and on the tasting menu, is in mcdonald's in a war with chick-fil-a. and now the latest from tradingnation.cnbc.com and a word from our sponsor. >>

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. welcome back, everyone i'm sue herera here is your cnbc update at this hour the fourth circuit court of appeals throwing out the emoluments lawsuit against president trump. maryland and d.c. sued the president, challenging payments to his washington, d.c., hotel by foreigners while trump was in the white house. the court ruled they have no legal standing to pursue their claims heavy rains flooding new orleans. the coast guard anticipates issuing potential waterway restrictions on the mississippi river in the next 24 to 48 hours. and that could restrict tanker traffic. this as the region braces for the possibility of a tropical storm, which could start to form in the gulf of mexico. mazda is recalling more than 260,000 vehicles in the u.s. it involves certain cx 5 suvs from the years 2018 and 2019 as well as mazda 6 sedans a software issue in the computer would lead to engines stalling

unexpectedly. and the british billionaire and inventor of the bagless vacuum cleaner, james dyson, has bought the most expensive apartment in singapore for $54 million. he decided to move his head office to singapore from britain to be closer to its fastest growing markets. you're up to date. that's the news update this hour back to you. >> sue, thank you very much. seema moda at the cnbc commodity desk. >> the energy market closely watching the storm that sue just mentioned. chevron and royal dutch and anadarko in the process of moving staff the threat is still unclear, but the gulf of mexico is home to 17% of u.s. crude oil output, 12 million barrels per day. that's why the market is closing up more than 4% on the day. >> that's quite a move, seema, thank you. tesla may be cranking up its factory line reports say tesla's president

sent an email to employees, saying the company is making preparations to boost production the shares up now about 3% on the news they are still down about 30% this year. joining us now is colin rush, the senior analyst at oppenheimer with a $437 price target also steve wesley, who is founder of the wesley group and former tesla board member. welcome to you both. colin, i'll just begin with you. we're used to hearing about production frenzies at the end of the quarter for tesla what is the timing of this leaked email tell you? >> there's really not that much information here what we do know is they're going to expand some capacity in fremont. we think that's appropriate as they ramp up the model y and certainly since they're leveraging off the model 3 platform, makes an awful lot of sense to just extend the capacity and have the supply chain moving to the same space so really, our view is that, you know, ultimately the oems -- competitive oems are slow to compete and tesla has a wider window of opportunity.

and this is a move for them to step into that window of opportunity. >> steve, the company has still had a tough year and even if that is slower online, it is coming i think i also read there is the next big thing what is important for tesla to do here to just show that it can hit the streets delivery estimates for the time being >> look, there's always been a lot of naysayers about tesla but look at the numbers. tesla just blew away its record number of sales, delivering 95,200 units last quarter. that is a stunning number. and what mr. musk has done so well is three things one, aside from single handedly popularizing the electric car industry, brought battery production in-house, giving a cost edge over the competition second, he's move quickly, expanding into europe, where

tesla is already the number-one selling vehicle, gas or electric in norway, switzerland and increasing number of countries he's got production facilities built in china and will be delivering cars from those facilities by the end of the year so he has consistently been a step ahead of competition. the fact he's selling more cars than anybody else is stunning. ponder this. tesla, in terms of units sold, was number five of all car manufacturers, gas, electric, in the united states last quarter and in terms of revenue, volume, they're number one didn't see that coming that's why we're bullish >> colin -- >> yeah. >> i was going to ask, steve, mr. musk has been a controversial figure, and he's come under criticism for some, i guess you would say, improv dent emails he's sent and another email leak saying tesla, is, quote, making preparations to ramp up production i don't know if this came from

mr. musk's account or somebody else's would elon benefit from a strong number two, and/or a stronger board? and i'm really asking, what was the board like when you were on it was it sufficiently challenging to him >> okay. two points here. first, would the country be better off if we took away mr. trump and mr. musk's twitter accounts i think maybe the answer is yes. but in terms of tesla's execution, it's hard not to be impressed. and i think tesla has built out their management team. i think they've brought in a new chairman of the company. and i think they're making movements to do that the fact remains, you need mr. musk to latch the team on. they're consistently ahead of everybody else in the industry he is the visionary that is tesla. now, wh now, would i want to work there? maybe not. but steve jobs latched people on, as well.

and the fact is, was not easy to work for do you want to bet against steve jobs or elon musk. i think the answer is no. >> colin, finally to you what does the stock need to do to reclaim its year-to-date loss >> i think they need to show positive cash flow there's a coupledrivers. first, we think they're going to show up in the second quarter and be able to guide effectively on that. and then we should see some benefits on their working capital. given that they have started ramping sales again and have a positive working capital benefit there. if we see them generate some positive free cash flow in the second quarter, we think there is another solid move higher for the stock from here. >> thank you both. colin rush, steve westly, appreciate it. >> thank you so much. >> you bet. virginia was named cnbc's top state for business in 2019 but if someone is first, then someone has to be last scott cohn has the story of number 50. >> rhode island is america's bottom state for business this year its fifth time in last place

but it's not for lack of trying to move up >> we have stopped the decline we have stopped the decline, and working together have ignited a comeback of this great state and our economy. >> the comeback has yet to show up in the numbers. near the bottom for business friendliness, cost of doing business, economy and still at the bottom for infrastructure. fixing that has been a priority for the governor. >> there is more road work going on in this state than at any time in our lifetime >> funded by a controversial program to charge tolls on trucks, not surprisingly unpopular with truckers like michael collins. >> we need to kill this cancer in this state, because it's going to spread like wildfire to other states. >> thank you >> the governor rode her plan to re-election last year, but still faces some skepticism. >> got to do something, as long as the money actually does go to the roads. >> the issue is it will be passed on to consumers but somebody has to pay for it.

>> the administration says in its first three years, there's been $1.5 billion worth of new road construction. 100 miles of roads paved and nearly 200 bridges repaired. unemployment is now in line with the national average, and 30 businesses have moved to the state. but school test scores are low, and economic growth is among the lowest in the country. to be sure, there are some things that rhode island can't do anything about. it is a small state and has a lot of built-in disadvantages, but there are a lot of other things like the infrastructure that rhode island is in control of, and the other issue with all of that is it's been going on for such a long time cnbc.com we have more about all of this, including a list of the states with the best and the worst infrastructure also coming up, next hour on "the closing bell," we're done from here in virginia, america's top state for business, which is also the site of amazon's h q2 and we're going to go in depth

with exclusive new details about how virginia won amazon. guys >> all right thank you very much. scott cohn competitors are taking aim at netflix, stripping the service of two of its most popular shows. "friends" and "the office. so what will be the next shot fired in the streaming wars? we'll look at that when "power lunch" returns carvana is six years old this year

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welcome back netflix is losing its "friends" weeks after finding out it would be kicked out of "the office." we'll have more on that in a moment. let's get to julia boorstin out there with more, julia, on what they make of this >> well, that's right, kelly i just sat down with hollywood veteran barry diller he tells me he thinks the streaming wars have turned into an arms race, and he thinks that netflix is best positioned take a listen.

>> no one is going to compete with netflix in gross subscribers. i believe they have won the game and i think there's nothing i can see that's going to dislodge them amazon is in a completely different business in that it's selling prime, which gives you all sorts of services, just among them is television disney has the best chance, just because of its very, very popular content. >> with diller, expedia competing with facebook, he says regulating tech giants is in the best interest of everybody but says he doesn't think companies should be broken up, unless proven that regulation doesn't work and he says he's hopeful good regulation will be put into place. kelly, back over to you. >> julia, thanks julia boorstin. with hbo max, the streaming sbas is getting very crowded every day a new service emerges,

battling for original content and burning cash to get it who will come out on top with us is brent harris, analyst and portfolio manager. good to have you with us. >> thanks for having me. >> is diller right has netflix won the game >> well, they're certainly light years ahead of everybody else. 150 million subscribers. their nearest competitor is 30 or 40. hbo, if you combine, maybe has 50 or 60 million across the globe so, yes, they are far ahead of most of the or all of the competition in terms of the number of subscribers. >> and yet you say they've got to start making money. >> well, at some point they need to start making money. >> but they can go a long time the way amazon did. >> it all depends on the path the market gives them, right so as long as they continue to grow subscribers, it seemed in this market, companies that can grow their top line at a high rate don't really need to make money. and, you know, if you think about the streaming business in general, if you -- what does it say about the streaming business in general if you have 150 million subscribers and still

are burning through 3 or $4 billion of cash a year, right? >> and if you've reached that number it was interesting, diller said no one can dislodge them because of the lead they have. but from the stock point of view, i wonder can the lead only shrink from here i mean, we know they can keep subscribers, they can increase price, they even are some pretty about churn numbers in terms of people coming back to watch "stranger things." but with all of these new players coming to market, is the only room for them to grow to the down side? >> at some point, competition matters, right so first off, it's very easy to switch in and out of these services so as you have more over the top services coming in, how much of that streaming, shopping or going in and out netflix for three months, switch over to hbo for "game of thrones. how much is that going to impact churn, right is going to be a big point and look, disney doesn't think they're going to be profitable in their streaming services until 2024 you've got hulu, also going to burn something like $1.5 billion for the next two years and not going to be break-even until

2024 so you just -- you have a lot of very large, very well-capitalized companies competing for the same market. which is both global and massive. but -- >> by netflix? >> no. i think -- >> after all all that? >> well, it -- you know, the valuation is high, there's a lot built into the stock right now there's going to be a tremendous amount of competition coming in over the next two to three years. i wouldn't want to be competing against amazon, apple, disney, comcast, at&t, time warner. >> a lot of attention is paid to them losing "friends" and "the office," are those flesh wounds or something deeper? >> to use your analogy, probably flesh wounds at this point netflix is bigger than two shows it'll probably hurt, they're two popular shows.

that library is valuable for these services someone said it earlier, you join a service for the content but you stay for the high quality library. perhaps it impacts churn a little bit >> the only thing i wonder, if we show the shows again that are so popular for viewership. the content that netflix makes now with its original content, do you think those will be as popular as library shows or not? >> who knows so those shows existed or were created in an ecosystem with with far fewer choice. when "friends" was around it did something like 20, 25 million per episode of viewers today the best show on television does something like 10, excludeing all the sports. so those types of shows, it was easier to get a much larger or more critical mass in culture.

so it remains to be seen whether the same streaming shows f will have the cultural legacy. >> were you amazed how well "stranger things" did? the numbers were huge, the people who have watched the whole season already is amazing. >> we were talking about something like 20 million. >> yeah. >> of their 150 million user base >> that's "friends" territory. >> definitely. >> that guy is cute there, that kid. we got to go see you, thanks. lower interest rates were supposed to help perspective home buyers and they did, but the market turning against them once again we'll have more on that story we'll have more on that story right after this at fidelity it's just $4.95 per online u.s. equity trade.

just when we thought the housing market was getting less competitive for buyers, signs are it is reversing again. anna joins us from washington to explain again. >> it's all about supply we've been in a severe housing shortage for several years which meant as demand rose prices did as well. this year we saw more listings and prices easing. but supply is expected to drop this fall and hit a new role

according to realtor.com gains continued to slow throughout the spring and it was up just 2.8% annually in june. now it is expected to flatten over the next three months and could hit its first decline in october of this year of course all real estate is local. the housing shortage is in smaller markets according to red fin. but prizier markets like san jose, seattle, denver, boston and washington, the supply of homes for sale is increasing a looming shortage could help the home builders but they need to lower prices or build more entry level homes because that's where demand is stronger and supply is leanest. check please is next or not

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check please welcome back with highly pertinent check information today. >> this is all about food. >> this is not going to be on your food. the heinz plastic jugs >> i like them. >> they're better than glass but now they have a new innovation, the upside down pouch, daisy did it first, their sales went up.

i have to say i'm using it for baby food all the time. >> you just squeeze it out >> squeeze it out. mcdonald's franchisee say the company needs a better chicken sandwich to compete with chi chick-fil-a. >> they can't compete with chick-fil-a, don't try. thanks for watching "power lunch. "closing bell" now. welcome to "closing bell," a historic day for stocks, the s&p crossed above 3,000 just below that level now, but looking for an all-time close all. all you need to know as an investor coming up with 59 minutes left of trade. >> let's get to what's driving the action higher in this final hour of trade. fed chair jay powell testimony pointing to a rate cut as soon as july. treasuriry yields are lower in response, so is the dollar small caps and